While the news about fixed income markets has been dire, there may be many good investment opportunities in the space. Speaking on Bloomberg Surveillance, BlackRock’s head of global fundamental fixed income strategy Marilyn Watson said that higher interest rates have in fact created a "far better environment” for fixed income investors, with “decent returns and little risk.”
“The world has changed completely from a year ago, three years ago, five years ago, 10 years ago,” Watson said. “But actually, it gives us a lot more optimism now in terms of fixed income actually giving you a lot of decent yield.”
The two-year Treasury rate is at 4.15%, compared to 0.28% last year. This is higher than the long-term average of 3.14%.
While the BlackRock executive noted that the money manager is still being “relatively cautious in this environment,” Watson also said that “fixed income now is … a very decent, good asset class,” and that for “fixed income investors in general, I think this is a far better environment going forward than we’ve seen for such a long time.”
“So, I think for the long term and going into next year … there are a huge number of opportunities in fixed income that we haven’t seen for such a long time,” she said.
In terms of rising interest rates, Watson also pointed out, "We’ve certainly seen interest rates much higher than this in the past and I certainly think we can live with interest rates being much higher.”
So, for long-term investors looking for opportunities in the bond markets, an active fixed income manager can help. While passive strategies often lack the flexibility to adapt to changing market environments, active bond ETFs can offer the potential to outperform fixed income benchmarks and indexes.
“Navigating the bond market is even more challenging for advisors this year as bonds fall in value,” said Todd Rosenbluth, head of research at VettaFi. “However, the ability to tap into the expertise of experienced managers along with the liquidity benefits of an ETF has been compelling.”
As part of its lineup of active exchange traded funds, T. Rowe Price offers a suite of actively managed fixed income ETFs, including the T. Rowe Price QM U.S. Bond ETF (TAGG ), the T. Rowe Price Total Return ETF (TOTR ), and the T. Rowe Price Ultra Short-Term Bond ETF (TBUX ).
T. Rowe Price has been in the investing business for over 80 years, conducting field research firsthand with companies, utilizing risk management, and employing a team of experienced portfolio managers carrying an average of 22 years of experience.
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